Our ‘Building on Strength’ strategy is fully focused on restoring profitability and improving cash flow and return on capital employed while protecting Fugro’s strong market leadership positions.
In 2016, we were not successful with implementing the planned portfolio changes due to the difficult oil and gas services market. Based on a review of our portfolio in light of the new business lines and divisions, we decided to integrate the subsea inspection, repair and maintenance services with other survey activities to become the core of the new Asset Integrity business line within the Marine division. For the installation and construction related activities, which do not fit our asset integrity solutions strategy, we will continue to pursue opportunities for partnership or divestment.
We continue to be open to reducing our stake in Seabed Geosolutions or enter into an extended partnership. Seabed is investing to benefit from a growing seabed geophysical market mainly focused on oil and gas development and production.
We have decided to retain the Fugro Synergy and fully utilise the vessel for geotechnical operations instead of also supporting well services work.
Client focus and market leadership
In the oil and gas market, Fugro has a global market leadership position for marine survey and geotechnical services. Market shares are highest in specialist areas due to our capability to take on large, integrated projects, provide data management services and our particular strength in frontier environments such as deep water offshore projects.
Due to our position as independent service provider, our clients are assured that results are provided impartially and confidentially and with the further assurance there is no conflict of interest with respect to other parties involved in their projects. Data, information and advice on natural resource assessment and development must be provided impartially and confidentially.
Fugro has been successful in further strengthening its market leading positions in the current very competitive, oversupplied oil and gas services market. Going forward, our restructured organisation will further support our drive to focus on our clients and will allow us to protect and expand our market positions.
Organisation and employees
Fugro is constantly adjusting its organisation to better support its clients in managing their projects in a sustainable, smart and cost effective way. Hence, we are refining our capacity to efficiently provide integrated geo-intelligence and asset integrity solutions spanning the range from data acquisition through to analysis and advice. To make the most of this opportunity and improve the efficiency of service delivery, Fugro has decided to regroup the geotechnical, survey and subsea services activities into Marine and Land divisions, with each division having two business lines: Site Characterisation and Asset Integrity.
The Site Characterisation business line supports the planning and design of new structures and infrastructure. It also supports the exploration and development of natural resources. The Asset Integrity business line supports asset life cycle management for new and existing structures and infrastructure, from construction to decommissioning.
As part of formation of the Marine and Land divisions, Fugro is merging operating companies into country organisations. This supports legal entity simplification by reducing the number of legal entities and further consolidation of support functions into shared service centers. This will result in cost efficiencies and improve the level of services we provide internally.
Fugro utilises an asset base consisting of a large pool of diverse data acquisition equipment, vessels, vehicles, laboratories plus IT resources and infrastructure. Our asset base is leading edge, well maintained and replaced when needed. Achieving delivery excellence relies on operating from a proper asset base, so that we can provide our services safely and reliably.
Vessels are a key component of our asset base. Fugro has an in-house vessel management organisation, targeting reliable, efficient and sustainable vessel operations against a single set of standards across the fleet. Since 2015 we have stepped up the rate with which owned vessels and vessels under long term charter are brought under central vessel management. The objective is to complete the transition to in-house vessel management in 2017.
Fugro cannot function without a proper, secure IT infrastructure, the development and maintenance of which is centrally coordinated. Increasingly IT is a client services enabler by supporting project work from multiple locations, remote services and long term data and information hosting for clients. Particular attention is paid to cyber security to protect client and employee data, to allow secure collaboration and to keep our networks up and running.
Technology leadership and innovation
Fugro’s leading market position is supported by its technology leadership. Fugro uses high-performance equipment, technologies, software and business processes. Much is developed in-house through research and development and innovation programmes, complemented as needed or when advantageous by working with clients, suppliers, research institutes and universities. Our technology development and innovation capabilities are a core strength of Fugro and essential to being able to achieve our strategic objectives.
Fugro has stepped up its research and development and innovation efforts in recent years and this is now delivering concrete results. Fugro’s recent programme to design purpose-built vessels equipped with our own proprietary technology is a good example. They provide Fugro with competitive and safety advantages. In addition, new vessels that replace older vessels add capacity while reducing per unit cost as they are more efficient than older vessels. They are also significantly more environmentally friendly and safe. These vessels will be the leaders in their class for years to come.
In 2016, Fugro generated 66% of its revenue from the oil and gas services market. To be more robust, it is desirable to create a better balance across multiple markets. Fugro aims to increase its business in the building & infrastructure, power, water and mining markets. The company will achieve this by investing more in these markets, on a relative basis, than in the oil and gas market. Also, once Fugro regains sufficient balance sheet strength to resume acquisitions, it is anticipated these will be biased towards these markets. Over time, these actions will result in the desired rebalancing.